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SYRACUSE, N.Y. - The Penn Traffic Co. said it has received multiple compelling proposals for a sale-leaseback transaction involving most of its owned stores and distribution center properties that could result in substantial aggregate net proceeds.

September 22, 2004, 08:00 pm

SYRACUSE, N.Y. - The Penn Traffic Co. said it has received multiple compelling proposals for a sale-leaseback transaction involving most of its owned stores and distribution center properties that could result in substantial aggregate net proceeds.

Accordingly, the company is postponing until Oct. 21 a hearing that was scheduled to take place today to approve the disclosure statement for its proposed Plan of Reorganization.

Penn Traffic would use the net cash proceeds from the proposed sale-leaseback transaction, in part, to repay all of its senior secured bank debt, to invest in continuing to modernize and enhance its store base, and for other working capital needs.

Penn Traffic filed its Plan of Reorganization with the U.S. Bankruptcy Court for the Southern District of New York last month. The previously filed reorganization plan contemplated that Penn Traffic would emerge from chapter 11 with approximately $55 million of senior secured bank debt and approximately $50 million of undrawn availability under its proposed working capital revolving credit facility.

In light of the potential sale-leaseback transaction and the significant change it would have on Penn Traffic's capital structure upon emergence from chapter 11, the company said it decided to postpone the disclosure statement hearing to give it more time to consider the sale-leaseback proposals and determine whether to file an amended Plan of Reorganization that would include a detailed description of the sale-leaseback transaction and the resulting adjustments to Penn Traffic's capital structure.

The chain said its creditors' committee and senior secured bank lenders supported the postponement of the disclosure statement hearing and the further consideration of the sale-leaseback proposals.

In a statement, Robert Chapman, president and c.e.o., said: "The proposed sale-leaseback transaction offers many potential benefits to the company that require further review and due consideration. The proposals on the table would unlock the intrinsic value in the company's real estate assets, eliminate the need for any long term debt upon the company's emergence from bankruptcy and significantly enhance our liquidity, which will in turn enhance our ability to compete in our core markets. Because of these benefits, the company, with the support of its banks and creditors committee, has decided to postpone this week's bankruptcy court hearing to explore these very compelling proposals. We remain fully committed to the successful restructuring of Penn Traffic on a timely basis."